E-Commerce News: Business: Adobe's Guidance Delights Investors

Adobe's Guidance Delights Investors

By Erika Morphy
E-Commerce Times
03/21/07 3:36 PM PT

Adobe beat Wall Street expectations for the first quarter and issued positive guidance that sent its share price surging. The company is feeling bullish as it prepares for next week's launch of its Adobe Creative Suite 3, which is expected to lift sales in the second quarter and beyond.

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Adobe Systems (Nasdaq: ADBE) posted better-than-expected guidance for the second quarter, causing its shares to rise by some 5.5 percent.

Adobe expects to realize revenue of some US$700 million to $740 million in Q2. Non-GAAP (Generally Accepted Accounting Principles) earnings, it said, should come in at 34 cents to 36 cents per share.

For the fiscal first quarter, Adobe earned 30 cents a share on $649.4 million in revenue.

Solid Q1 Performance

Both announcements surpassed Wall Street's expectations. Analysts had expected 26 cents per share for the first quarter and had provided guidance of 35 cents per share on revenue of $717 million for the second quarter.

"Q1 was a solid quarter for Adobe," said CEO Bruce Chizen, "as we came in at the high end of our earnings target range and were within our targeted range for revenue."

Indeed, much of the optimism concerning the company's future prospects is linked to the pending release of Adobe Creative Suite 3, which is widely expected to boost the company's bottom line.

Creative Suite 3 includes updates to the ubiquitous Photoshop and Illustrator programs, plus Dreamweaver Web development software. It is expected to launch next week and ship late in fiscal 2007.

Ripple Effect

There is also some optimism about the third quarter related to the launch of Adobe's new Creative Suite software bundle.

"The company expects the new product to push sales in the third quarter above that of the second quarter," Frederic Ruffy, an analyst with the investor education firm Optionetics, told the E-Commerce Times.

"Creative Suite 3 is expected to be the biggest launch in Adobe's history," he noted.

Adobe is also expected to benefit from sales of Acrobat 8, which was released in the fourth quarter 2006.

The market's positive reaction to the latest guidance seems to reflect the view that new product launches will lead to an improvement in revenue and earnings throughout the remainder of 2007, said Ruffy.

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